Summit Global Logistics files Chapter 11 bankruptcy to complete $56.5 million asset sale

By Caroline Salls

Pittsburgh, Jan. 30 - Summit Global Logistics, Inc. filed Chapter 11 bankruptcy Wednesday in the U.S. Bankruptcy Court for the District of New Jersey to complete the proposed $56.5 million sale of the company and its TUG USA and FMI International operating subsidiaries to TriDec Acquisition Co. Inc., according to a company news release.

According to the release, TriDec will be owned by some of the founders of Summit's operating companies, members of senior management and Summit's senior secured lenders.

Members of Summit's management will also provide new capital in connection with the sale, and Summit said it will use a portion of the financing to increase working capital.

In addition to the cash purchase price, TriDec has agreed to assume related liabilities. The sale will be subject to the receipt of higher bids at an auction, as well as to bankruptcy court approval.

According to an 8-K filed with the Securities and Exchange Commission, the stockholders of TriDec will include Summit management members Greg DeSaye, Bob O'Neill, Joe DeSaye, Michael DeSaye, Jerry Huang, Robert Lee, Robert Wu and Robert Agresti, as well as senior secured lenders Fortress Credit Corp., Ableco Finance LLC and Plainfield Direct Inc.

Reorganized Summit will not be a public company, the release said.

"After several months of working with our senior secured lenders, we have reached an agreement that we believe will make Summit a much stronger company," Summit president and chief executive officer Agresti said in the release.

"After a careful review of our strategic options, we concluded that the proposed restructuring would lay a strong foundation for the future growth of the company while also ensuring management continuity, providing a revolving credit facility and reducing our overall debt."

Summit said its existing senior secured lenders continue to support the company's business model and the current management team.

According to the 8-K, the bankruptcy filing constituted an event of default under Summit's senior secured credit facility and convertible notes, which caused an automatic acceleration of $51 million in senior secured debt and gives the convertible noteholders the right to force the company to redeem the $95 million of notes.

Upon the sale closing, TriDec will enter into agreements under which members of Summit's management would receive additional compensation based on the achievement of specified EBITDA targets and based on their continued employment, the company said in the 8-K.

DIP terms

Summit's senior secured lenders have also agreed to provide the company with up to $5 million in debtor-in-possession financing, with Fortress Credit Corp. acting as the DIP agent, according to court documents.

The company is seeking interim access to $2 million of the DIP financing.

DIP proceeds will be used to pay payroll, taxes, inventory suppliers, overhead, rent, utilities and other expenses necessary for the continued operations of the company's businesses and the management and preservation of its assets.

Interest will be Libor plus 675 basis points.

The DIP facility will mature on the earliest of April 30, upon confirmation of a plan of reorganization, upon the sale of substantially all of the company's assets or upon the company's failure to meet the requirements of the sale process.

Summit will pay a $50,000 DIP facility fee, an $850-per-day collateral monitoring fee, plus expenses, and letter-of-credit fees of 3% of the outstanding face amount.

Summit listed $50 million to $100 million in assets and $100 million to $500 million in debt on its bankruptcy petition. According to a 10-Q filed with the Securities and Exchange Commission, the company had $57.86 million in assets and $192.7 million in debt as of Sept. 30.

The company's largest unsecured creditors include Maersk, Charlotte, N.C., with a $2.8 million accounts payable claim and First Insurance Funding Corp., New York, with a $1.63 million insurance premium claim.

Based in Kenilworth, N.J., Summit provides supply chain management services in the United States, Asia, Russia the Commonwealth of Independent States, the Eastern Mediterranean, the Middle East and India. Its Chapter 11 case number is 08-11566.

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